India’s economic growth slowed in the third quarter through December from the previous three months, the government said on Monday but raised its forecast for the full fiscal year after revising higher its estimates for the first two quarters.

GDP growth in the October-December period of 2015-16 slipped to 7.3 per cent despite a surge in manufacturing as the farm economy contracted, according to data released by the Ministry of Statistics and Programme Implementation.

The government also revised growth for the April-June period to 7.6 per cent from 7 per cent estimated earlier and for the July-September period to 7.7 per cent from 7.4 per cent. As a result, the government now expects full-year growth at 7.6 per cent compared with 7.2 per cent for 2014-15.

This means that while growth may not hit the 8 per cent target that the government had previously suggested, it may be able to surpass the upper end of the 7-7.5 per cent revised target.

The revision puts the GDP estimate higher than not only the 7.4 per cent projection of the Reserve Bank of India, which had kept it unchanged in its last policy review, but also that of the International Monetary Fund, the Asian Development Bank and other international organisations.

Another reason for the government to cheer about the figures would be that nominal growth was back on track in the third quarter as current price estimates showed a 9.2 per cent expansion as compared with 6.4 per cent in the second quarter. The latest estimate also raises hopes that the government may achieve its fiscal deficit target for this year.

So what’s wrong?

Sectoral classification showed just three of the eight industrial categories recording growth in gross value added in the third quarter compared with the second quarter.

The biggest push to the GDP came from manufacturing, which grew 12.6 per cent, the highest in 13 quarters. Farm sector growth contracted 1 per cent while financial services expanded 9.9 per cent. Overall, growth in gross value added was 7.1 per cent, lower than the first-quarter figure of 7.2 per cent.

Although the GDP figures show a bright picture given the revival in manufacturing, there is a dichotomy when it is compared to other macroeconomic indicators.

Data for manufacturing, industrial production and infrastructure showed output growing at a constant pace in the third quarter.

Another scare for the economy would be a fall in gross fixed capital formation and a drop in government final consumption expenditure as percentage of GDP while data for consumption showed some improvement.

The GDP numbers come as a big relief for the government as it prepares to announce the budget at the end of this month. A cutback in spending amidst concerns of rising fiscal deficit may set the tone for GDP growth for next year.

The RBI, in its policy review last week, had projected growth of 7.6 per cent for the next fiscal year but it seems the economy may hit that mark this year itself.